A savings account earns 3 percent.If the saver is in a 22 percent tax bracket,the after-tax savings rate of return would be ________ percent.

Question

Quizplus · Accepted Answer

The after-tax savings rate of return is calculated by subtracting the taxes paid on the interest from the interest rate. At a 3% interest rate and a 22% tax bracket, the taxes on the interest would be 3% * 22% = 0.66%. Therefore, the after-tax rate of return is 3% - 0.66% = 2.34%.

A Savings Account Earns 3 Percent